Threat to tax ‘cuckoo funds’ as FG feels the heat on housing crisis

No place like home: Actor Meg O’Brien from Co Mayo at Smock Alley, Dublin, as she acted out children’s experiences of living in family hubs. Photo: RollingNews.ie

The Government will consider taxing so-called ‘cuckoo funds’ if they continue buying up residential property in blocks, Tánaiste Simon Coveney has conceded.

Fine Gael is struggling to defend its housing policy amid growing controversy about the ease with which large-scale investors are muscling families out of the market.

The Coalition is accused of pushing people into renting rather than owning their home. Mr Coveney was forced to tell the Dáil: “We believe in home-ownership and want everybody to have the opportunity to own his or her own home.”

The funds pay no corporation tax, no income tax and no capital gains tax in most cases.

Yet the Tánaiste also vigorously defended cuckoo funds which are snapping up hundreds of apartments at a time in order to lease them.

And one of Finance Minister Paschal Donohoe’s top advisers has claimed searing criticism from the UN of policies that facilitate big funds in Ireland contained “many red herrings”.

The UN condemned the Irish system for allowing investment funds to buy up vast swathes of properties and then rent them out at sky-high costs.

Fianna Fáil’s housing spokesman Darragh O’Brien told the Independent.ie ‘Floating Voter’ podcast he believes the problems in the housing market now amount to the biggest crisis in the country.

“This is the single biggest crisis that we have, and God knows we have one in health as well,” he said.

The Dublin Fingal TD said the tax treatment of funds “needs to be addressed”. He suggested they should be paying corporation tax “at the very least”.

Big corporations spent more than €1.1bn buying a record 2,923 housing units in Ireland.

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Yesterday, the Irish Independent revealed how 295 apartments at Clay Farm in south Dublin are being put on the market with a guide price of €130m.

It is excepted they will be acquired by a single buyer who plans to release them into the lucrative rental market.

Mr Coveney said the institutional investment is adding to the overall supply by financing stock that has not yet been built.

“To try to paint this as a matter of institutional investors versus others who want to buy their own homes on an individual basis, however, shows a misunderstanding of what we need to do collectively to try to increase supply across all areas. The latter is what we are trying to do.”

But in a concession the Government is starting to feel the heat, Mr Coveney accepted the phenomenon needs to be watched “closely”.

“We need to consider the taxation approach to increasing investment, particularly in apartments,” he said.

Mr O’Brien said in a diversified market there would be room for institutions but now they are “gobbling” up homes.

“There is absolutely a push from Fine Gael to tell people that renting is fine. But I’m telling people from a Fianna Fáil perspective, the best security you can have is to own an affordable house,” he said.

Meanwhile, Mr Donohoe also looks to be on a collision course with the UN’s Special Rapporteur on the Right to Housing Leilani Farha.

She wrote to the Government here and in five other countries accusing them of facilitating the “financialisation of housing” in their own countries by “adopting laws and policies which treat housing as a commodity”.

The Government has yet to respond to the letter but is expected to do so by the end of May. Ms Farha is due in Ireland in June.

However, yesterday using the Twitter social media platform, Mr Donohoe’s most senior policy adviser Ed Brophy suggested the UN criticism was unfounded and even disingenuous.

“The letter contains many red herrings & we will respond in due course. However, one point, in particular, strikes me – surely the test of international competitiveness of a country in the modern world is its attractiveness for investment. On that measure we are in a very good place,” he said.

“It wouldn’t be appropriate to set out our detailed views on the letter in advance of the formal government response.”

Asked about the intervention, Ms Farha said she has been given no indication what in her letter is being described as a red herring either.

Mr Brophy had given her an assurance the Department of Finance is undertaking action to improve housing affordability but that also included “no specifics”, she added.

Mr Brophy is a former Labour Party insider who was chief of staff to the Tánaiste Joan Burton in the last government. He became a senior adviser to Mr Donohoe last year. A spokeswoman for the minister said the UN letter contained a number of claims in relation to housing that are “not supported by research carried out by the Department of Finance”, citing its own report issued last February.

The department’s research had found that institutional investors and large-scale landlords had little impact in the residential property market. However, it was based on data from 2017 – before the explosion in activity by so-called ‘cuckoo funds’.